Page 18 - Insurance Times July 2016

prove the intent of fraud or abuse, which in turn will result
in unwarranted law suits against the Insurers filed by their
Insured/Claimants in the court of law and ultimately
alienating the genuine customers from them.
The Management will have to appoint a person with
experience, knowledge & exposure to the various frauds in
the industry, who is high on integrity, passion and up to date
on the emerging fraudulent techniques adopted by the
fraudsters and their geographical locations, whose job would
be to remain agile, vigilant, diligent, proactive and efficient Similarly, there have been instances of breach of the Fraud
in building a robust team to oversee and manage the
introduction and implementation of the Fraud & Abuse
Control Policy at the micro level.
The designated person will have to keep the management
abreast, on regular intervals, with the findings & action
taken reports in each case. This will enable the
management to implement the policy in Letter & Spirit,
which will act as a strong deterrent to the fraudsters
planning to strike in the future.
In the case of breach of the Fraud & Abuse Policy by an
employee/s, the Insurers should act swiftly without delay
in identifying the wrong doing and immediately take steps
to take the lid off the fraud and ensure punitive action is
immediately initiated against the concerned employee/s.
They should also try to identify whether the immoral act
was committed by the employee/s individually or in
connivance with some other stake holders viz. Surveyors,
Brokers/Agents/TPA’s.
It is generally observed that the Insurers shy away from
initiating action against Agents/Brokers by complaining to
IRDA about their wrong doings or their involvement in
unethical practices, as they are worried about the impact
of such action on the amount of business flowing in from
these entities but in the longer run it would have a very
bad impact on the profitability of the company. Lately,
Insurers have realised it and have started taking punitive
action against the Agents by filing F.I.R’s against them but
they are still found would waiting in course home of action
against the Brokers.
The Broker, as an identity, is not an individual like an Agent
(who has to promote and place business with a single
insurance company) but is a firm or a company registered
and recognised by IRDA. They have the flexibility to work
with any Insurance company and would not be directly
involved in the wrong doings and eventually can’t be held
responsible for the illegal/fraudulent acts committed in the
18 The Insurance Times, July 2016
business routed through them but some individual
overseeing and in charge of the operations & marketing in
the broking company, would be involved in the immoral/
illegal act & hence, it would in turn make the broking
company responsible for any wrong doings of their
employee/s or any authorised persons. It is definitely a very
complex scenario but lately, many fraudsters are found to
be taking advantage of the systemic flaw and are routing
the fraudulent business through these broking companies.
& Abuse Policy by the TPA’s or their employees in connivance
with the employees of the Insurance company, Hospitals,
Doctors, Agents or Brokers or the Consultants whilst
servicing the customers of the Insurers while conducting the
Pre Insurance Medicals and also, during the management
of their claims. The Insurers should immediately act to curb
this menace, as it adversely affects their bottom line due
to the impact of paying fraudulent claims.
The TPA’s & the Broking companies should be held liable
and responsible for the immoral act of their employee/s and
punitive action should be initiated by the Insurance
companies against them with the knowledge and guidance
of IRDA.
The third and the fourth step is to build a data centric
approach along with advanced and predictive modelling.
Here, different forms of data should be captured, analyzed
and reviewed at regular intervals.
“Red flags” should be developed to predict suspicious
behavior across the insurance value chain. Tolls like ‘fraud-
o-meter’ should be developed and used for predictive
analytics. There should be mechanism in place to ensure
the revision and enhancements of the rules engine on an
on-going basis.
As markets mature, organization would get better at
managing fraud, but we believe that CEO needs to
strategize to increase their organization pace in identifying
and mitigating frauds. While it may not be possible in the
immediate future to iron out frauds completely, the goal is
to reduce the scale and frequency of frauds. We believe, if
CEOs pursue the four step framework as a solution, then
the companies would be a much better placed to manage
frauds and move towards a the ideal goal of elimination.
The current situation warrants a wake-up call for all the
CEO’s of the insurance companies so that they don’t become
prey to menace of fraud and abuse. 